The aerospace and defense (A&D) industry achieved record revenue and profits in 2012 on the strength of a surging commercial aviation market. Industry revenue and operating profit increased 2% and 4%, respectively. Median Top-Performing Companies (TPC) scores for the largest A&D companies improved to their highest levels since 2007, the year before the Great Recession. Mid-size company scores were flat, but remained at historic highs, and smaller company scores dropped considerably, after a brief peak last year.
We know about bubbles all too well. We are still recovering from the housing bubble and financial crisis. A decade earlier, we experienced the tech bubble, before that another real estate bubble and so on. Economic bubbles are caused by speculation that drives unsustainable growth. We also know that bubbles inevitably burst, with disastrous consequences to their respective industries and often to the overall economy.
Aerospace & Defense (A&D) companies achieved strong revenue and operating profit in 2010, resulting in a rebound in Top-Performing Companies (TPC) scores, nearing historical highs. Although defense budget cuts are looming, military spending for 2010 was in line with prior years and commercial aerospace was generally stronger. However, operating profit was up significantly over the prior year, primarily due to better program performance.
The aerospace and defense industry managed to turn in a respectable performance in 2009, despite a severe global recession. Revenues increased by 2%, reaching a record. Deliveries of large commercial aircraft hit an all-time high of 979, despite concerns about available financing. Furthermore, defense spending remained stable and all the large defense primes except EADS reported revenue increases.
Last year set new records for A&D industry revenues and profits. However, 2008 was marked by two distinct periods: strong profitability was achieved in the first three quarters, while the fourth quarter was shadowed by a gathering storm of the intensifying global financial crisis and a crippling strike at Boeing. Although new profit records were set, aggregate Top-Performing Companies scores decreased modestly in 2008 overall, indicating the peak of the current cycle may have occurred during the third quarter. The decrease is attributable primarily to two factors.
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